Renegotiation Flight

At his press conference, Treasury Secretary Henry Morgenthau cast off his usual timidity and forthrightly denounced the 1944 tax bill. The Treasury, said he, would be better off without any tax bill than with the one just put together by the Senate Finance Committee. He was angriest over sections of the bill which virtually repeal the Contracts Renegotiation Act. Said he: "They open the way to truly extortionate profits. I predict if they are enacted into law they will come back to plague not only the Congress but the war goods manufacturers. They hold the seed of a national scandal.

"The smartest thing business can do is to leave the Renegotiation Act alone, unless business executives want to spend the rest of their lives on the Hill before investigating committees."

Next day, grave old Senator Walter George, Finance Committee chairman, called in reporters. Henry Morgenthau's criticism, said he, came with "exceeding bad grace," especially from a man who had never offered any suggestions on renegotiation. In fact, said Senator George, warming up: Henry Morgenthau knew nothing at all about contract renegotiation, and even less about the law.

But for once Henry Morgenthau had a good case. In the last 20 months, in 13,000 contract renegotiations, the Army, Navy and Maritime Commission have saved the Treasury $5.3 billion -- of which $2.5 billion was actually returned to the Treasury, and the remainder saved for the taxpayers by reductions on future deliveries. The committee tax bill would throw all these cases open to court review, and would exempt many manufacturers from any renegotiation whatever. Henry Morgenthau had the solid backing of the Army & Navy.

The tax bill, three months in the making, finally went to the Senate floor. Hints came of a possible Presidential veto. Walter George might have to do a little renegotiating himself.

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